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The PACE program: a new approach to financing commercial energy efficiency and renewable energy upgrades

The Johnson Controls Institute for Building Efficiency, PACENow and the Urban Land Institute released a report this month on Property Assessed Clean Energy (PACE) financing, which is a “municipal approach to support energy efficiency and renewable energy upgrades in commercial buildings in the United States” that originated in 2008 in Berkeley and Palm Desert, California. The report profiles four of the 16 PACE programs that are currently accepting applications, including the Toledo-Lucas County Port Authority program based in Toledo, Ohio.

Each program operates slightly differently due to the PACE industry being in the early stage of development. However, PACE financing structures commonly include features such as: zero up-front cash investment; low interest rates; immediate positive cash flow; long-term financing (up to 30 years in Ohio); PACE assessments can run with the land upon sale; the ability to pass payments through to tenants; higher rents and greater long-term property value because of energy efficiency; and preservation of borrowing capacity through off-balance-sheet financing.

The specifics vary from program to program, but generally, after a state passes PACE-enabling legislation, a local government then creates or joins an assessment district. Building owners evaluate projects that reduce energy costs and decide whether to move forward. The local government then provides financing by adding the assessment to the tax roll. The property owner then pays the assessment on a tax bill for a period of up to 30 years. For more information, including eligible technologies and projects, preferred initial and eligible project sizes, minimum energy savings requirements and a full list of the active PACE programs across the nation, read the full report.

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